First of all I am a disclosing I have been an investor of FCPG for over 2 ½ years now. I have been with FCPG when they went from a local distributer of Medicines to a National Distributer of Medicines via the National License to sell on the internet. They went from large profit margins for the local sales to significantly smaller profit margins in exchange to participate in the national sales. In order to qualify for the national license FCPG agreed to the lower profit margins, Management decided by expanding the top line growth the bottom line would over time expand and would not have any limits. This still seems like a good decision, the only drawback has been qualifying for expansion capital... This was derailed by the previous auditor, Rotenberg (EFP) by not turning over the work done on the financials. Without 10k filings expansion capital was not made available. Banks are kind of funny that way; they require proof of income before lending any money. We also have other issues to deal with in regards to this sector of stocks.
What has happened is this sector of, the reverse merger sector (RTO); these Chinese companies listed on the US exchanges have taken a big hit. Some of the Reverse Merger stocks deserved it and others did not. FCPG in my opinion did not deserve just because it is a reverse merger stock. That being said Management of FCPG has not helped by not communicating in a significant manner to offset any of the overall moods towards this sector of stocks with regards to FCPG own PPS. This has helped keep the price of this stock down.
The relationship with FCPG and EFP was an unusual one. When they severed their relationship with FPCG EFP did not dispute financial reports submitted by EFP they just stated FCPG owes $40,000.00 so the reports owed to FCPG, the financials, could not be released until the $40, 000 was paid in full. Never mind EFP has been paid hundreds of thousands of dollars for the work already performed up until that point. EFP should have at least released the audit work completed up until that point. That would have meant releasing the full 2012 10k report and possibly the first quarter of 2013. EFP decided not to do either, so the question is did EFP perform any work that they were paid for. Just because EFP notified FCPG they were leaving China does in no way release them from the obligation of supplying FCPG for work completed and paid for. So the question is did EFP perform any work at all and if not why not? Again remember there was no dispute over the numbers previously filed 10k reports
Now where are we with regards to the overall picture of these Chinese companies listed on foreign exchanges? China still has not come to an official agreement with international investment community on auditing guidelines for the books on China soil. This then leaves a big confidence issue with the overall international investment community about these Chinese companies. You would think that being listed on the US exchanges would have cleared some of the that issue up but it has not. This forces these companies to keep two sets of books one for the PRC and the other for the international investment community. This creates doubts and opens up for corruption as no one really knows what is what because of the lack confirmation of earnings. This is at the heart of the reporting problems of FCPG and other Chinese small companies listed on foreign exchanges. The original hiring of EFP (Rotenberg) was supposed to have taken care of this issue by consolidating the reporting requirements of the PRC and the international investment rules by simultaneously filing with the PRC and the SEC, but it appears solving this issue never materialized for FCPG. Thus for now we can only hope the hiring of Marcum will cure this problem time will tell.
The bright spots for this stock is that they are doing business in China and do have a national license to sell medicines over the internet nationwide and they have expanded to meet the real and potential growth by expanding their warehouse space and the number of employees working. This has all been muted by the fact no financials have been filed over the last year and no forward looking estimates have been released. This has hampered FCPG growth prospects, because of not being able of obtaining any working capital loans to assist the expansion of sales for the desired growth estimated by this time.
The only evidence of growth was the last 10k filings back a year ago and the top line growth was over 20% and profit margins were improving. But we really do not know officially what has occurred since then because of the lack of any financials. This has been a big drag on this stock price over this year.
Well as of December 13, 2013 Marcum was hired as the new Accountant for FCPG:
SECTION 4 - MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS
Item 4.01. Changes in Registrant's Certifying Accountant.
(b) New independent registered public accounting firm
On December 9, 2013, the Audit Committee of the Board of Directors of First China Pharmaceutical Group, Inc. (the "Company") engaged Marcum Bernstein & Pinchuk LLP (the "New Accountant") as its independent registered public accounting firm to audit the Company's financial statements for the Company's current fiscal year ending December 31, 2012 and the fiscal year ended December 31, 2013. The engagement was approved by the Board of Directors of the Company on December 13, 2013. The due diligence required by Marcum has successfully been completed and the New Accountant has formally accepted the engagement with the Company.
See complete article at http://www.sec.gov/Archives/edgar/data/1432254/000106299313006330/form8ka.htm
First China Pharmaceutical Group, Inc. (OTC:FCPG) hiring Marcum is a very big positive and getting their reports of the financials in order will open up none dilutive working capital. Also, getting the financials in order will open up the possibilities of listing this stock on the HK and Singapore exchanges. Even though these exchanges are not as large as the US exchanges this will open up the ability of local Chinese investors to invest and could drive the price per share higher. FCPG has expressed interest in listing with these exchanges but have not been able to because of the Auditor fiasco.
Investing in these Chinese RTOs is not for the halfhearted. The Chinese Management does not really care what the shareholders think and that makes it for a contentious relationship. But the legit Chinese managers do keep their eye on the store. They do try and keep cost down and maximize their profits this is after all the end game.
At this time I do not have a price target on this stock but if all the financials are filed timely over the next couple of months and loans for working capital are secured we could see a substantial jump in the share price from its present price of $0.08 to $0 .10. This is one of those hidden gems that will surprise and the time to get the stock at these prices in my opinion will not last for very long.
So the Hiring of Marcum Bernstein & Pinchuk LLP is defiantly a big positive and I will note this is still a high risk stock because of the history of not reporting their past financials but the road block for not filing has been removed and the numbers will speak for themselves when they are finally released.
Again this is not for the full hearted but it is for the investor that has a higher than normal tolerance for risk. This is a buy for your high risk portion of your portfolio.
Remember do your own DD before investing in this or any other stock recommended.
Disclosure: I am long OTC:FCPG.
Additional disclosure: This is my first posting with Seeking Alpha.